Nike Inc. - Foster School of Business

Leesa Hung – Julia Ferreira – Victoria Lalonde – Nicolas Lindstrom
Nike Inc.
Mandate
1
Recommend 3
countries for
Nike to shift its
current China
manufacturing
into
2
Recommend
ways to
implement
traceability of
the supply chain
for collegiate
apparel
3
Building
consumer
awareness
showcasing
Nike’s
commitment to
sustainability
and improved
labour practices
Recommendation
Strategic shift of production of collegiate apparel from China to Mauritius, Sri
Lanka and Vietnam by partnering with Esquel Manufacturing Group who will
allow Nike to implement online platform traceability initiative
Nike will market its commitment to sustainability and improved labor
practices through its new “School Pride Fueling Better Lives” campaign
By the end of 2015
all Chinese
manufacturing will
has been divested
Sustaining Future
Gross Margin and
Increasing Net
Income by 10.4%
over 5 years
Timeline
Agenda
□
Departure from China
□
External/Internal Environment
□
Consumer/Brand Perception
□
Country Criteria/Selection
□
Country Implementation
□
Traceability Implementation
□
Marketing of Collegiate Apparel
Departure from China
China Wage Forecast
Why?
300.0
• Increase in labor
wages
• Appreciation of Yuan
vs. US dollar
• Cost of shipping goods
250.0
200.0
150.0
100.0
50.0
0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Decreasing cost advantage
When seeking a new manufacturing facility must insure
these factors are no longer a threat
Agenda
Departure from China
□
External/Internal Environment
□
Consumer/Brand Perception
□
Country Criteria/Selection
□
Country Implementation
□
Traceability Implementation
□
Marketing of Collegiate Apparel
External/Internal Environment
External Environment
Internal Environment
1. April 2013: Rona Plaza, Bangladesh
factory collapsed leading to over 1,100
deaths
• Signing of the Accord on Building
and Fire Safety
1.
Did not sign the act:
• Minimal production in
Bangladesh
• Launch 2020
• Launched a material traceability
(organic cotton and recycled
polyester)
2. Universities hold licensees to a code
of conduct (labor standards):
• UofW: Minimum employment age
set at 14 or 15 years old
2.
Exceeds the standards set by the
UofW
• Minimum employment age set at
16 years old
Nike leads the industry in sustainability practices by
exceeding the industry requirements
Agenda
Departure from China
External/Internal Environment
□
Consumer/Brand Perception
□
Country Criteria/Selection
□
Country Implementation
□
Traceability Implementation
□
Marketing of Collegiate Apparel
Brand Perception & Key Trends
Favorite Brand 13-33
Years Old
• Nike 4.5% (Ranked
third)
• Age group 86 Millioncontrols $1.3 Trillion in
Consumer Spending
Consumers Increasingly
Demanding Information
• Origin of Products
• Manufacturing
Methods
• Contents of Products
Pay for Sustainable
Products
• Willingness to buy fair
trade products- 43%
globally
Leverage brand to meet consumer demand with
regards to more transparency and sustainability
Agenda
Departure from China
External/Internal Environment
Consumer/Brand Perception
□
Country Criteria/Selection
□
Country Implementation
□
Traceability Implementation
□
Marketing of Collegiate Apparel
Country Selection - Criteria
Textile
Industry
Minimum
Wage
Country
Risk Index
Low risk
Lower than China
Value-Added
greater than
China
High risk
Greater than
China
Shift production to countries with low
manufacturing cost & low risk
Textile Manufacturing Value-Added
35
30
25
20
15
10
5
0
The highest value added percentage creates the
largest value creation from opportunities
Minimum Wage
Wage increases is the greatest contributor to China’s diminishing cost advantage:
200.0
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
Low minimum wage outlines the value add
sustainability of these countries
Country Selection - Criteria
Cost-based:
1. Textile manufacturing value
added
2. Minimum wage
Must out-perform China
Country Risk Index:
1. Political: stability, corruption
regulatory quality, rule of law
2. Economic: inflation, GDP, ease
of doing business
3. Social/Compliance: Human
Development Index, labour
standards
4. Infrastructure/Climate: World
Risk Index, transportation
Relatively low risk & risks that
can be mitigated
Vietnam
Political
Economic
Social/
Compliance
Infrastructure
/Climate
• Relatively stable (56th percentile)
• Ease of Doing Business Index ranking close to China
(99/189)
• Relatively low Human Development Index ranking
• Relatively low quality of overall infrastructure and ports
• Funds currently being channeled into infrastructure
(roads, ports, power generation facilities)
Despite structural challenges, Vietnam is the second largest supplier of
Nike-branded products after China
Sri Lanka
Political
Economic
Social/
Compliance
• Relatively low level of corruption (91/177)
• End of 26-years civil war presents growth opportunities
• Ease of Doing Business ranking superior to China
(85/189)
• Human Development Index ranking is superior to China
(80/186)
Infrastructure
• High quality of overall infrastructure & ports
/Climate
Mauritius
Political
• 80th percentile ranking
• Political stability, regulatory quality, rule of law
• Low corruption level (52/177)
Economic
• Easiest place to do business in Sub-Saharan Africa
(20/189)
Social/
Compliance
• Human Development Index ranking is superior to
China (80/186)
Infrastructure
/Climate
• Low vulnerability: natural disasters
• Quality of overall infrastructure is superior to China
• Quality of ports is high and cost to export is low
Agenda
Departure from China
External/Internal Environment
Consumer/Brand Perception
Country Criteria/Selection
□
Country Implementation
□
Traceability Implementation
□
Marketing of Collegiate Apparel
Implementation Overview
Shifting production out of China
• Divesture of factories
Shifting production to Vietnam
• Current location, current partner
Shifting production to Sri Lanka
• Current location, new factory
Shifting production to Mauritius
• New location, new factory
Shifting Production out of China (Short-Term)
When?
1.
Notification
• Minimum of 6 months prior to the last
scheduled production
Who?
• Factory Exit Response Team (FERT)
5. Followup
2. Initial
assessment
How?
• 5-step Factory Divesture process
Order of Factory Divesture
• Based on Manufacturing Index rating
• Guangdong Esquel Textiles Company
Ltd. will be last
4. Execute
action plan
3.
Preliminary
action plan
Shifting Production to Vietnam
Manufacturer
• Esquel Group
• Current partner, strong reputation,
strategic fit
• Operations in Sri Lanka and Mauritius
Factory
• Esquel Garment Manufacturing (Vietnam)
Co., LTD in Thuan Ahn
• 2nd largest factory producing collegiate
apparel in Vietnam (4600 line workers)
Since staying with the same manufacturer has many benefits,
we will be using Esquel Group in Sri Lanka and Mauritius
Shifting Production to Sri Lanka
When?
• Minimum 6 months before operations
must begin
1. Business
Justification
Form
Who?
• Head of Supply Chain (manufacturing)
• Director of Sustainable Manufacturing &
Sourcing
5.
Maintaining
the Factory
2.
Contractor
Compliance
How?
• New Source Selection Process
Where?
• Polytex Garment Ltd.
• Jaela
• Kegalle
• Koggala
• Yakkala
4. Factory
Approval
3. Third
Party Audits
Shifting Production to Mauritius
When
• Minimum 6 months before operations must begin
• Longer than Sri Lanka
Who
• Head of Supply Chain (manufacturing)
• Director of Sustainable Manufacturing & Sourcing (SM&S)
• SM&S Representative
How
• New Country Approval Process (Initial Step)
• Review of Mauritius’ environment, brand exposure, & infrastructure
• New Source Selection Process
Where
• Esquel (Mauritius) Ltd.
• Beau Bassin
• Flacq
• Grand Bois
• Goodlands
College Apparel Income Statement
The increase
Chinese
labour
inflation
continues to
depress
margins
As China reaches US cost parity resulting in
decreased margins, growth benefits dampen
Monthly Wages per Country
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Historical CAGR
Assumption
Vietnam
38.0
46.9
43.0
40.5
42.4
43.3
45.90
48.65
51.57
54.67
57.95
2.6%
6.0%
Sri Lanka
62.3
58.7
59.7
61.1
52.9
52.3
54.65
57.11
59.68
62.37
65.18
-3.4%
4.5%
Mauritius
120.8
107.5
111.6
119.7
114.4
111.9
116.38
121.03
125.87
130.91
136.14
-1.5%
4.0%
Average
73.7
71.0
71.4
73.8
69.9
69.2
72.31
75.60
79.04
82.65
86.42
88.4
85.2
85.7
88.5
83.9
83.0
86.77
90.72
94.85
99.18
103.71
9.3%
8.0%
Foreign cost
Premium
-23%
-31%
-36%
-43%
-50%
-54%
-55%
-57%
-58%
-59%
-61%
China
115.1
124.4
132.9
154.8
166.7
179.2
193.54
209.02
225.74
243.80
263.30
The disparity between
labour cost in China and
other manufacturing
countries has warranted
a change in production
location
The 9.3% YoY cost
inflation accelerates
future problems
Phased Shift in Production
Labour Cost
FY13
FY14E
FY15E
FY16E
FY17E
FY18E
Phased Shift
Status Quo ($M)
China
Production shift ($M)
China
Vietnam
Sri Lanka
Mauritius
Total ($M)
Wage Saving
27.77
30.14
32.00
35.48
38.49
41.76
27.77
24.19
1.32
1.45
1.83
7.26
10.53
1.49
1.80
7.30
10.59
1.53
1.77
7.33
10.64
24.94
27.90
31.12
27.77
25.51
10.60
1.40
1.14
4.50
17.64
-
4.62
14.36
Phasing out production
creates delayed effects
yet increases efficiency
The gradual
production
shift can be
seen in full
effect by FY16
College Apparel Income Statement
FY13
College sales
Revenues
Royalties
Growth
COGS
Cost reduction
Gross Profit
Margin
Selling Expenses
G&A
EBITDA
D&A
Interest (Income)
EBT
Income Tax
Net Income
Margin
1,728
173
974
753
44%
187
344
222
27
196
48
147
9%
FY14E
1,866
187
8%
1,054
5
816
44%
204
392
220
29
191
47
144
8%
FY15E
FY16E
Production shift
2,052
2,237
205
224
10%
9%
1,158
1,264
14
25
909
998
44%
45%
223
243
408
445
278
310
32
35
247
276
61
68
186
208
9%
9%
FY17E
2,438
244
9%
1,379
28
1,087
45%
264
485
338
38
300
74
226
9%
FY18E
2,658
266
9%
1,503
31
1,186
45%
288
529
369
41
328
81
247
9%
CAGR
9%
10%
11%
11%
Lower
Labour cost
are a driving
force of cost
reduction
Labour cost
Support
Margins
Shifting production will sustain margins for the
long term
Agenda
Departure from China
External/Internal Environment
Consumer/Brand Perception
Country Criteria/Selection
Country Implementation
□
Traceability Implementation
□
Marketing of Collegiate Apparel
Traceability
What are our current efforts?
Already apart of many certification and associations as well as Nike’s
own initiatives:
• Fair Labour Trade
• Better Cotton Initiative
• Considered Index, Materials Sustainability Index, Footwear/Apparel
Sustainability Index, Manufacturing Index
•...
What more should be done?
Need to communicate to consumer
Use an online platform, where Nike will share select information
regarding their products with their consumers
Traceability – Online Platform Implementation
1
M
Track ID: 475 040 263
Get tracking code to the label of the t-shirt
2
Consumer heads to the website
to enter the tracking code
Traceability – Online Platform Implementation
3
Meeting the farmers, mill and the manufacturing plant:
• The location
• The labor conditions
• Material sourcing methods
Feasible or Not ?
• 90 Plants across 15 Countries: Cannot trace all farms, mills and manufacturing
o Information is not available
o Lack of power over the manufacturer or farmer
o High Turnover with Manufacturing Plants
• Pick a single manufacturer to work with to implement traceability and
transparency effectively
Traceability – Online Platform Implementation
Chosen Manufacturer to Partner with to Obtain the
Information: Esquel Group
Power
Self Desire
• Increase in 7,500 workers with the
Sri Lanka, Mauritius and Vietnam
production transfer
o Which results in a 143%
increase in Esquel’s production
of Nike products
• OEKO-TEX STeP Certification (Level
3, highest classification)
• In the shifting schedule of the
Chinese manufacturing to the new
regions, Esquel’s manufacturing
facilities are the last to be divested
• Tammy Rodriguez – Director of
Corporate Social Responsibility as
been elected as Board Member of
the board of FLA
• Gold Award of the Hang Seng Pan
Pearl River Delta Environmental
Awards
Advantage initiative for both party, in addition will increase Nike’s traceability
with the consolidation of production with high reporting manufacturer
Agenda
Departure from China
External/Internal Environment
Consumer/Brand Perception
Country Criteria/Selection
Country Implementation
Traceability Implementation
□
Marketing of Collegiate Apparel
Marketing of Nike Products
Should Nike’s Commitment to Sustainability and Improved Labour
Practices be in the Marketing of Nike Products?
YES
Why?
Consumers Want
Origin, Manufacturing Methods & Contents
of Products
College/University Educated Will Pay More
Fair Trade 30.6%
Organic 44.8%
Unique Selling Proposition
Limit Brand Switching
Female Sports Apparel
Tripled- exceeded $350M FY12-13
Pay More: Fair Trade & Sustainably Produced
Willing to Pay More
46% of Global consumers pay more for
companies that give back
89 M Females Self-Identify
as College Sports Fans
Building Consumer Awareness
MARKETING
OBJECTIVES
AWARENESS
Nike’s Commitment
to Sustainability &
Labour Practices
• Use Tracking Code (printed on
products)
• Enter into Nike Track My School Pride
section of website
• Receive detailed info of product and
origin
• Awarded for Fueling Your School Pride
for Better Lives
MESSAGE
STRATEGY
School Pride
Fueling
Better Lives
BIG IDEA
TRACK YOUR
SCHOOL
PRIDE!
School Pride Fueling Better Lives
Website Section
Social
Media
PR &
Web PR
Promo
Tactics
POS &
Displays
Web
Banners
TIMELINE
Announcement Campaign
PR, Web PR, Bloggers, Social
Media
POS Posters & End-Aisle Displays
Social Media Sharing
#nikeschoolpride #justdidit
#fuelingbetterlives #nikejustdoit
Promotion Buy 3 School Pride
Sustainable Products-10% off DTC
Conclusion
1
Recommend 3
countries for Nike to
shift its production
2
Recommend ways
to implement
traceability
3
Building consumer
awareness
Strategic shift of production of collegiate apparel from China to Mauritius, Sri
Lanka and Vietnam by partnering with Esquel who will allow Nike to
implement online platform traceability initiative
Through our recommendation, we sustain future Gross Margins, increase
Net Income by10.4%, while strengthening our traceability and sharing our
commitment to sustainable and improved labor practices with our
consumers
Thank you, questions?
Nike
Traceability
Country Selection
Manufacturer
Selection
Marketing
Financials
Nike
Efforts
Code of Conduct
Factories
Manufacturing Index
New Source
Selection Process
Nike Divesture Steps
Efforts
•
•
•
•
Helped found the Fair Labour Association
(FLA)
Moved from only having a Code of Conduct
for factories to monitoring its factories and
collecting environmental and labor data
Moved the Corporate Responsibility team
further up upstream in the corporate decisionmaking process
Developed multiple indexes to rate its
sustainability practices and those of its
independent contract manufacturers (CI, MSI,
FSI, ASI, MI and CRI)
Nike’s Code of Conduct
Source: Nike Inc.
New Source Selection Process
Objective: optimize the existing source base, eliminate duplication, eliminate
the need to introduce a new risk to the Nike, Inc. supply base and determine
the need to introduce a new factory to the existing licensee source base
1. Business Justification: What competitive advantage does this vendor provide
that we do not currently have in our existing source base? (Price, Quality,
Delivery, Product type)
2. Contractor Compliance Profile
3. Monitoring visits from independent professional monitoring organizations:
Assess the contractor's current level of compliance with the local law, as well
as their potential for continuous improvement in the areas of local
compliance and Nike, Inc.'s Code of Conduct.
4. Factory Approval: Production may only begin after the contract factory has
achieved a Bronze Labor rating, a HSE score of 67% or higher
5. Maintaining the factory: Ongoing monitoring and remediation
Source: Nike Inc.
Nike Inc. Factory Divesture Steps
1. Notification, both internally to Nike, Inc. via the exit brief a minimum of 6 months prior to the last scheduled
production - and externally, to the factory advising in
writing your intent to exit;
2. Initial assessment, including the impact to the worker;
3. Determine divesture risk as routine or, needing the
Factory Exit Response Team (FERT)/preparing the
preliminary action plan;
4. Execution of the action plan;
5. Post decision/follow-up.
We can minimize the impact to the factory and the worker
through responsible divesture
Factories
China
Vietnam
Sri Lanka
Nike’s Collegiate Apparel Factories: China
Factory Name
Line
Workers
GUANGDONG ESQUEL TEXTILES COMPANY LTD
5326
NINGBO SHENZHOU KNITTING CO. LTD. -#6 GARMENT FACTORY
2825
FAR EASTERN APPARAL (SUZHOU) LTD. CO
1149
JIANGSU ASIAN SOURCING HEADWEAR MFG.CO.LTD
799
YUANTIAN KNITTING GARMENTS CO., LTD
692
TMI ZHONGSHAN CO LTD
619
FUJIAN FUTIAN GARMENTS CO., LTD.
600
NINGBO ISUN FASHION CO., LTD
359
NINGBO EASTEX
324
QINGDAO RUIHE KNITTING
223
Source: Nike Inc.
NIKE’s Collegiate Apparel Factories: Vietnam
Factory Name
HANSAE VIET NAM CO., LTD.
ESQUEL GARMENT MANUFACTURING (VIETNAM) CO., LTD
FAR EASTERN APPAREL (VIETNAM) LIMITED
VIET TIEN GARMENT CORPORATION
YUPOONG VIET NAM
CCH TOP (VN) CO., LTD.
VINH HUNG - JOINT VENTURE CO., LTD (TMI VIETNAM)
UNIPAX CO., LTD
MOLAND CO., LTD
GREEN VINA
UNITED SWEETHEARTS GARMENT (VIETNAM) CO., LTD.
MAXPORT J.S.C
I.S VIETNAM CO., LTD
S.J VINA CORPORATION
Source: Nike Inc.
Line
Workers
9450
4600
2832
2518
1912
1836
1826
1658
1615
999
866
425
218
211
NIKE’s Collegiate Apparel Factories: Sri Lanka
Factory Name
Line
Workers
MAS ACTIVE (PVT.) LTD. - LINEA INTIMO
1481
MAS ACTIVE (PVT) LTD - CONTOURLINE DIVISION
1436
Source: Nike Inc.
Manufacturing Index
Source: Nike Inc.
Traceability
Why traceability?
Esquel Group
Third Party
Certifier/Participating
Groups
String Together
Becoming a Certified
Farmer
Traceability Process
Major Textile (Collegiate
Apparel)
Other Partner
Consideration
Polyester
Manufacturing
Why Traceability?
• With consumers becoming increasingly demanding with regard to the origin,
manufacturing methods and contents of the products they buy, product labels are
playing an ever more important role in buying decisions and are the subject of ever
more stringent regulations
• Undoubtedly influenced by increasing reports about poor living and working
conditions in third world countries and a desire to offer a fair price to producers, as
many as 43% of respondents globally said they would pay more for “fair trade”
products
Increased demand for traceability and transparency, if it can be prove
consumers are willing to pay a premium
Through this initiative we will provide the consumer with what they want
and benefit from the premium
Third Party Certifier/Participating Groups
Fair Labour Trade
Better Cotton
Initiative
Fair Labour Trade
• Already a participating company
• Code of Conduct across their supply chains
• Conducting external assessments so that
consumers can be assured of the integrity of the
products they buy
• Creating a space for CSOs to engage with
companies and other stakeholders to find viable
solutions to labor concerns
Source: Fair Labour Trade
Better Cotton Initiative
• Already a participating member (Pioneer Member)
• Share the risk as BCI scales up and invest significant amounts
both in global capacity and for farmer support
• As leading BCI members and key investors in supply creation, Nike
participate in investment decisions on farmer support, and have
the opportunity to feed procurement requirements into decisions
on supply geography
• In communications, Nike is identified as a leader
Source: Better Cotton Initiatives
Becoming an Certified Farmer
1. Submit application to accredited independent 3rd
party certifier
2. Develop Farm Plan for Ecosystem Management
3. Develop an Internal Control System, includes record
keeping
4. Annual Inspections by certifier
5. Transition period of 2-3 years depending on standard
Source: Textile Exchange
Major Textile (Collegiate Apparel)
Cotton
80%
Polyester 20%
Cotton
100%
Polyester
100%
Polyester Manufacturing
Steps
1. Polymerization: Condensation polymerization occurs when the acid and alcohol are
reacted in a vacuum at high temperatures. The polymerized material is extruded in the
form of a ribbon onto a casting trough or cooling wheel. After the ribbon hardens, it is
cut into chips.
2. Spinning :The chips are dried and then put into hopper reservoirs for melting. Polyester
is a "melt spun" fiber, which means that it is heated, extruded through the spinnerets,
and cools upon hitting the air. From there it is loosely wound around cylinder
3. Drawing: The fibers are then hot stretched until they are about five times their original
length in order to decrease their width. The fiber is then wound onto cones as
filaments or is crimped and then is cut into staple lengths.
Man made material , does not involve harvesting unlike cotton
Nike has very stringent labor policy in place (in order to determine their
manufacturer) therefore Nike is covered on that front
Esquel Group
OEKO-TEX STeP Certification
Hang Seng Pan Pearl River Delta
Environmental Award
OEKO-TEX STeP Certification
• Attained the OEKO-TEX® STeP Certification, Level 3, which is the highest
classification, for its environmentally friendly production and applying socially
responsible policies thoroughly in the textile processing chain
• Esquel is the first textile enterprise in the country to be granted with this new
certification
• STeP, short for Sustainable Textile Production, was launched in July 2013 by OekoTex Association with an advanced set of assessment standards to replace its existing
Oeko-Tex Standard 1000
• STeP investigates environmental management and the fulfillment of social
responsibility of textile companies
• Oeko-Tex Association has appointed TESTEX, a Switzerland-based Swiss Textile
Testing Institute for the audits to ensure Esquel’s manufacturing processes complies
with the requirements of STeP and its 6 modules of assessment, including chemicals,
environmental performance, environmental management, social responsibility,
quality management and safety
Source: Esquel Group
Hang Seng Pan Pearl River Delta Environmental Award
• Esquel has been recently accorded the “Gold Award” of the Hang Seng Pan
Pearl River Delta Environmental Awards
• The Awards, jointly organized by the Federation of Hong Kong Industries
and Hang Seng Bank, aim to recognize and promote sound environmental
practices adopted by companies operating in the Pan Pearl River Delta region
• One of the highlights among the 18 submitted projects is the advanced
waste water treatment/recycling system, which is able to treat part of the
wastewater to a level that is potable and reusable in its production process
• Over the years, Esquel Group have built a strong reputation as a
responsible and green company
• We invest heavily on adopting advanced technology and innovative
manufacturing practices and have aggressively curtailed our water and
energy consumption by 61% and 46% between 2005 and 2013 respectively
Source: Esquel Group
String Together
What is String Together
& How Does it Work?
Reason for Rejection
What is String Together & How Does it Work?
What?
String is an online platform, where organisations
in the extended supply chain can share selected
information related to the products they make
with the customers who buy them.
How Does it Work?
• Every company that uses the String platform
records information about their product,
including the suppliers they use, the processes
they run and the finished products they make
• They use their usual batch or lot numbers and
production records to complete this data, and
then send the data to their customer via String
when the products are shipped
• String links all of these pieces of data together
to form one long product history
• Push vs. Pull Method
Reasons for Rejections
1. Failure with Adidas because of the costs and
complexity of the supply chain
(implementation)
2. No ease of use, company gets a log in to
access the data then must export to post on
website
Traceability Process
1
2
Cotton Field
6
3
Cotton Bales Assigned a
Tracking ID
Cotton Harvesting
5
4
M
Track ID: 475 040 263
Consumer can use the
code on the Website
Apparel of the same
Batch have the same ID
Cotton Mills Keep the
assigned Tracking ID
Traceability Partner – Other Consideration
Far Eastern Apparel:
The first garment factory invested by
Taiwan Far-East Group in mainland China
in 1996.
Nike factories:
• Suzhou, China
• Thuan An, Vietnam
Esquel Group is the best choice as Nike wants to
broaden its impact in the industry
Country Selection
Major Textiles
Political Indicators
Quality of Port
Infrastructure
Nike: Ranking
Organic Cotton
Forecasted Growth
Producing in the U.S.
Cotton Supply
Ease of Doing
Business Index
Producing in Mexico
Organic Cotton
Supply
Human
Development Index
Producing in India
Mapping Countries
and Supply
World Risk Index
Nike’s Country Risk
Index
Quality of Overall
Infrastructure
Major Textiles
Source: Nike Inc.
Nike: Ranking Organic Cotton
• More than 16
million pounds of
organic cotton in
2011
• Goal: Target to
source 100
percent
sustainably grown
cotton (better
cotton or organic)
by 2020
Source: Textile Exchange
Need to shift production to a location near an elevated supply of
organic cotton and it is grown in a ‘‘ better environment’’
Cotton Supply – World’s Organic Cotton Supply
Country
22%
27%
7%
8%
11%
25%
Quantity
(mb – 480lb
per bales)
China
32
India
29
United States
12.9
Pakistan
9.5
Brazil
7.5
Other
25.8
Source: Cotton Incorporated
Organic Cotton Supply – World’s Organic Cotton Supply
1% 2%
5%
Country
Quantity
(mt)
India
103,004
Turkey
15,802
China
8,106
Tanzania
6,891
USA
1,580
Other
2,584
6%
11%
75%
Source: Textile Exchange
Mapping Countries and Supply
Legend
Selected Countries
Production of Cotton
Production of Organic Cotton
Nike’s Country Risk Index
Source: Nike Inc.
Political Indicators
Rankings
Defined
Corruption
Perception Index
Political Indicators - Rankings
Based on percentile rank:
90
80
70
60
50
40
30
20
10
0
Political Stablity and Absence of Violence/Terrorism
Source: The World Bank
Regulatory Quality
Rule of Law
Political Indicators - Defined
Political Stability & Absence of Violence/Terrorism
• Likelihood that the government will be destabilized or overthrown
by unconstitutional or violent means, including politicallymotivated violence and terrorism
Regulatory Quality
• Ability of the government to formulate and implement sound
policies and regulations that permit and promote private sector
development.
Rule of Law
• Extent to which agents have confidence in and abide by the rules
of society, and in particular the quality of contract enforcement,
property rights, the police, and the courts, as well as the likelihood
of crime and violence.
Source: The World Bank
Corruption Perception Index
Mauritius
52
Macedonia (FYR)
44
China
Country
Rank (out of 177)
Mauritius
52
Macedonia (FYR)
67
China
80
Mongolia
83
Sri Lanka
91
Moldova
102
Indonesia
114
Vietnam
116
Nepal
116
Pakistan
127
40
Mongolia
38
Sri Lanka
37
Moldova
35
Indonesia
32
Nepal
31
Vietnam
31
Pakistan
28
Fiji
0
10
Source: Transparency International
20
30
40
50
60
Forecasted Growth
Real GDP
Inflation
Real GDP – Forecasted Growth
14.0
12.0
China
Fiji
Real GDP %
10.0
Indonesia
Mongolia
8.0
Nepal
Pakistan
6.0
Sri Lanka
Vietnam
4.0
Macedonia (FYR)
Moldova
2.0
Mauritius
0.0
2013
2014
Source: Euromonitor International
2015
2016
2017
2018
Inflation - Forecasted Growth
12.0
10.0
Pakistan
Vietnam
Mongolia
Inflation %
8.0
Nepal
Sri Lanka
6.0
Mauritius
Moldova
4.0
Indonesia
China
Fiji
2.0
Macedonia
0.0
2013
Source: Euromonitor International
2014
2015
2016
2017
2018
Ease of Doing Business Index - Rankings
Mauritius
20
Macedonia, FYR
25
Fiji
62
Mongolia
76
Moldova
78
Sri Lanka
85
China
96
Vietnam
99
Nepal
105
Pakistan
110
Indonesia
120
0
Source: The World Bank
20
40
60
80
Rank (out of 189)
100
120
140
Human Development Index - Rankings
Macedonia (FYR)
78
Mauritius
80
Sri Lanka
92
Fiji
96
China
101
Mongolia
108
Moldova
113
Indonesia
121
Vietnam
127
Pakistan
146
Nepal
157
0
20
40
Source: United Nations Development Programme
60
80
100
120
Ranking (out of 186)
140
160
180
World Risk Index
Rankings
Defined
World Risk Index - Rankings
Rank
Country
WRI
Exposure
Coping
Adaptive
13
Mauritius
15.18%
37.35%
40.64%
18.96%
60.61%
42.35%
16
Fiji
13.56
27.71
48.93
26.14
75.3
45.35
18
Vietnam
12.81
25.35
50.53
28.08
76.71
46.8
33
Indonesia
10.54
19.36
54.46
33.01
81.79
48.57
61
Sri Lanka
7.67
14.79
51.83
27.33
78.7
49.46
73
Pakistan
7.21
11.36
63.45
37.69
86.72
65.94
80
China
6.91
14.43
47.87
27.93
70.03
45.64
96
Macedonia (FYR)
6.19
14.38
43.01
20.59
64.7
43.75
106
Nepal
5.53
9.16
60.43
43.56
81.51
56.23
111
Moldova
5.05
11.11
45.45
23.32
66.49
46.54
150
Mongolia
3.1
6.52
47.6
33.62
65.35
43.82
Source: Alliance Development Network
Vulnerablility Susceptibility
World Risk Index - Components
Source: Alliance Development Network
Quality of Overall Infrastructure
Overall infrastructure = transportation, telephony and energy
Mauritius
57
Sri Lanka
61
China
72
Macedonia (FYR)
89
Indonesia
90
Pakistan
100
Moldova
119
Vietnam
123
Nepal
133
Mongolia
137
0
Source: World Economic Forum
20
40
60
80
100
Ranking (out of 139)
120
140
160
Quality of Port Infrastructure
Sri Lanka
43
Mauritius
46
China
59
Pakistan
59
Macedonia (FYR)
66
Indonesia
101
Vietnam
113
Moldova
128
Mongolia
128
Nepal
133
0
Source: World Economic Forum
20
40
60
80
Ranking (out of 147)
100
120
140
Producing in the U.S.
- Increased competitiveness
- Proximity to consumer
market
- Re-localization costs
- Severe decline of
manufacturing sector (assets,
supply chain & talent)
- Underperforms China in
terms of value-added and
minimum wage
Producing in Mexico
- Increased competitiveness
- Proximity to consumer
market
- Factories already producing
collegiate apparel
- Relatively high level of
corruption (106/177)
- Underperforms China in
terms of value-added and
minimum wage
Producing in India
- Skilled, low-cost labour force
- New location
- Underperforms China in
terms of value-added
- Poor infrastructure (high
logistics costs)
Manufacturer Selection
Criteria
Manufacturer
Alternatives
Rejection Reasons
Manufacturer Selection - Criteria
Reputation
• Awards
• Innovation: materials, processes
Compliance with NIKE standards
• Fair labor standards
• Commitment to health & safety of workers
• Considers environmental impacts
Global presence
• Operations in multiple countries
Size
• Ability to absorb China’s production & future growth
Manufacturer Selection – Others Considered
Textile Exchange: A non-profit
organization aiming to accelerate
sustainable practices in the textile value
chain through its members
Vietnam:
• Barco Uniforms
• Econscious
• Esquel Group
Sri Lanka:
• Esquel Group
• PT Indorama
Synthetics TBK
Mauritius:
• Esquel Group
• Puma
• Tropic Knits
Manufacturer Selection – Reasons for Rejection
Manufacturer
Reason
Vietnam
Barco Uniforms
Econscious
Manufacturer of scrubs and lab
coats
Not located in Sri Lanka and
Mauritius
Sri Lanka
PT Indorama Synthetics
Limited manufacturing
capability: spinning
Mauritius
Tropic Knits
Fine knits only
Marketing
Knights Apparel
Brand
Target
School Pride Fueling
Better Lives
Social Media
Knights Apparel
#1 in the Top-25
Apparel Licensees
Sustainability Initiative
• Alta Gracia
Brand
Brand Perception: Solving Sweatshop
Problem
Among Favorite Brands
Brand Perception: Solving Sweatshop Problem
History
• Rising prices in Korea and Taiwan cause Nike to urge contractors to move to
Indonesia, China, and Vietnam
• 1991: Activist Jeff Ballinger publishes a report on low wages and poor working
conditions in Indonesia
• Nike responds with factory code of conduct
• 1992: Ballinger writes about an Indonesian worker who works for less than
minimum wage and documented abuse
Mitigation
Risk
Shifting country
manufacturing focus
could lead to past issues
Contingency
• Negative views
of Nike
• Labor criticism
Nike Indexes
FLA
Commitment To Fair
Trade
Source: http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5
Nike Among Favorite Brands for 13-33 Years Old
Moosylvania Branding Firm (April 4th, 2014)
1000 people between 13-33 to name their favorite brands
1)
2)
3)
4)
Apple 7.5% of 3000 possible answers
Samsung 4.8%
Nike 4.5%
Sony 4.1%
Source: http://www.forbes.com/sites/samanthasharf/2014/04/04/teens-and-20-somethings-love-apple-sony-and-nike-but-should-investors/
This 86 Million strong age-group controls $1.3 Trillion
in Consumer Spending
Target
Why do people buy Nike?
Target Profiles
Why Do People Buy Nike?
Convey
School
Spirit &
Pride
Lifestyle Consumption
Social
Status of
School
Brand
Value
Nike
CollegiateLicensed
Apparel
School
Uniform
“Fit-In”
Fashion/
Design
Target Profiles
Females & Males
Alumni & Parents
Target Profiles (Females & Males)
Females, 15-22 Years Old
• Aspires to go or already attends a University
• Product Use: wear workout apparel and comfy everyday
clothes at home/campus
• Social status implied, Fan of college sports, wants fair
trade & organic products, SM
Males, 15-22 Years Old
• Aspires to go or already attends a University
• Product Use: Workout, everyday wear, playing &
watching University team sports
• Likes to buy products from companies that give back to
communities/workers
Target Profiles (Alumni & Parents)
Alumni, 22+
• Pride in attended University, Memories and social status
of being a graduate
• Product Use: gym wear, comfortable home wear, roots
for University Sports Team
• How to Reach: YouTube, Alumni Database, SM, Online
News
Parents of University Student
• Buys children College-Licensed Apparel was accepted or
before doing so to instill inspiration, Nostalgia of their
University days
• Product Use for themselves: rooting for University Sports
Teams
• How to reach them: through students, alumni database,
online news
School Pride Fueling Better Lives
Press Release
Awards
Logo
Building Consumer Awareness
Official Label of Licensed
Collegiate Products
Nike Sustainability Product 7P’s
Website Location
Interactive Map & Worker’s
Profile
Press Release
NIKE ANNOUNCES NEW CAMPAIGN CENTERED AROUND COLLEGELICENSED APPAREL AND SUSTAINABILITY, TWO THINGS TO BE
PROUD OF 04.12.2014
“Nike is proud to announce it’s next step in our goal of strengthening our triple bottom line
all while keeping performance and innovation at the forefront of all that we do. SCHOOL
PRIDE FUELING BETTER LIVES is a way for college-licensed apparel users to track their TShirts and Pullover Hoods all the way back to the raw materials that were used as well as
the hands who made them. For the first time Nike is able to connect our customers with
our back-end of production and manufacturing of our products. The products are branded
under Nike umbrella but have special tracking codes printed on the inside of the apparel.
Users will be able to use the tracking code by entering it into Nike Track My School Pride
section of the Nike website. From there they will receive detailed info of the product, its
origin, the worker’s and how Nike is helping them live better lives. Lastly they can upload a
picture of themselves wearing the products to the website and it will have a special logo on
it awarding the user for “Fueling Your School Pride for Better Lives” which can then be
uploaded to Facebook, Instagram, Twitter and/or Pinterest. Consumers will be happy to see
the transparency levels that Nike offers in terms of product manufacturing and they will be
able to view all of the other initiative that Nike is involved in, including LAUNCH (a
collaboration including NASA in order to serve the world in a better way). Nike is pushing
limits in sustainability, transparency and traceability as well as the needs of all athletes.”
Where?
University Sustainability Groups - Bloggers
Online News Forums - YouTube Video
Logo
Official Label of Licensed Collegiate Products
Why?- Authentication and to reduce counterfeit items and infringers
Track This Product!
See the materials used &
the hands that made it!
#nikeschoolpride
#justdidit
#fuelingbetterlives
#nikejustdoit
Source: http://www.clc.com/Resources/FAQs.aspx
Website Location
Enter Here
Interactive Map and Worker’s Profile
Where does your product come from?
Enter Tracking Code Here
Worker Profile: Mauritius
Name: Michelle Chan
Age: 20 years old
Occupation: Cotton Field Worker
Hobbies: Sit in the shade and sing
“Thank you for buying the clothes that our cotton makes, me
and my family are grateful for all that Nike does for us! “
Awards for Funding your School Pride for Better Lives
CONGRATULATIONS!
Thank You Sarah from
University of Washington
for not only Fueling Your
School Pride but Fueling
Better Lives as well!
Keep up the Great Work!
Don`t Forget to Share
#nikeschoolpride
#justdidit
#fuelingbetterlives
#nikejustdoit
Build Consumer Awareness - Action Plan
•
•
•
•
•
•
Issue:
• Demand from consumer for sustainable products and people tend to buy more
from companies who do give back
• Convey message, set Nike apart from other college branded apparel
• College students already buy Nike, need to provide them with more; a feel good
factor
Marketing Objective: Build awareness of Nike’s commitment to sustainability and
improved labour practices
Communication Objective: Strengthen emotional connection with customers by
levering our environment/social engagement
Message Strategy: “School Pride Fueling Better Lives”
Big Idea: Track Your School Pride!
Tactics:
–
–
–
–
–
–
Social Media
PR
Web PR
Web Banners
POS: In-store posters
In-Store Displays
Nike Sustainability Product 7P’s
Products
• Men & Women; Cotton T-Shirts & Pullover Hoods
Price
• Slight Premium, T-Shirts $38, Pullover Hoods $65
Distribution
• School Stores, Online Campus Store, Big Box
Sports Retailers
Promotion
• Social Media, PR & Web PR, Web Banners, POS &
Displays, Promo
People
• Educate School staff & student advocacy groups
Payment
Production
• Return policy: Discretion of vendor
• Sri Lanka, Vietnam, Mauritius
Social Media
Facts About Social Media
Social Media Users
Social Media Users Education
Facts of About Social Media
Social Media Users
Social Media User Education
Pricing
Men’s Apparel
Women’s Apparel
Pricing – Men’s Apparel
Reg.
$90.00
Pricing – Women’s Apparel
Reg.
$36.00
Reg.
$25.00
Reg.
$30.00
Reg.
$25.00
Reg.
$25.00
Reg.
$25.00
Collegiate Licensing Company
Types of Licensing
College Licensed Apparel
Top Selling Universities
Industry Leaders
Types of Licensees
• Standard License
NIKE
o Allows a company to produce items for extensive
resale, usually with permission from several schools
• In-state License
o Allows a company to produce items for resale for one
local school only
• Restricted/Internal Use License
o Allows a company to produce non-retail items that are
sold directly to an individual school
College Licensed Apparel
•
•
•
•
•
•
•
•
•
•
•
•
T-Shirts
Jerseys
Sweatshirts
Fleece
Hats
Shorts
Pants
Shoes
Polos
Jackets
Socks
Underwear
Consumers
• Men
• Women
• Teens
• Children
173 Million
Passionate
College Fans
Most Popular Items 2012-13: T-Shirts, Fleece, Women’s Apparel and Headware
Collegiate Licensing Company – Top Selling Universities
Top Selling Universities for First Quarter of Fiscal Year 2013-14
• (1.) The University of Texas at Austin (2.) The University of Alabama (3.) University of Notre Dame (4.) The
University of Michigan (5.) University of Georgia (6.) University of Florida (7.) Louisiana State University
(8.) Texas A&M University (9.) University of Nebraska (10.) University of Kentucky (11.) The University of
Oklahoma (12.) University of Arkansas (13.) University of Tennessee (14.) University of North Carolina
(15.) University of Wisconsin (16.) University of South Carolina (17.) West Virginia University (18.) Auburn
University (19.) University of Missouri (20.) Florida State University (21.) The Pennsylvania State University
(22.) University of Louisville (23.) The University of Kansas (24.) Clemson University (25.) Oklahoma State
University (26.) Texas Tech University (27.) Arizona State University (28.) University of Washington (29.)
Virginia Polytechnic Institute and State University (30.) Oregon State University (31.) The University of
Arizona (32.) University of Illinois (33.) University of Utah (34.) University of California, Los Angeles (35.)
University of Minnesota (36.) Syracuse University (37.) Washington State University (38.) University of
Miami (39.) Duke University (40.) Purdue University (41.) University of Mississippi (42.) Stanford University
(43.) University of California, Berkeley (44.) Boise State University (45.) University of Maryland (46.) Texas
Christian University (47.) Brigham Young University (48.) University of Virginia (49.) University of
Cincinnati (50.) University of Montana (51.) University of Pittsburgh (52.) University of Connecticut (53.)
University of Colorado (54.) East Carolina University (55.) Georgia Institute of Technology (56.) Rutgers
(57.) University of Wyoming (58.) Fresno State (59.) Vanderbilt University (60.) Colorado State University
(61.) Georgetown University (62.) University of South Florida (63.) U.S. Military Academy (64.) Boston
College (65.) University of Central Florida (66.) University of New Mexico (67.) University of Nevada (68.)
Montana State University (69.) Marshall University (70.) Northwestern University (71.) The University of
Memphis (72.) Louisiana at Lafayette (73.) James Madison University (74.) Temple University (75.)
University of Delaware
Collegiate Licensing Company – Industry Leader
Top Selling Apparel Licensees for First Quarter of Fiscal Year 2013-14
• (1.) Knights Apparel (2.) NIKE USA (3.) Sports Licensed Division of the adidas
Group (4.) Gear for Sports (5.) Colosseum Athletics Corporation (6.) Top of
the World(7.) Outerstuff Ltd. (8.) College Concepts (9.) VF Imagewear
(Section 101 by Majestic) (10.) Haddad Brands (11.) Russell Brands (12.)
Columbia Sportswear (13.) Twins Enterprise (14.) JASR dba J. America (15.)
T-Shirt International (16.) 5th & Ocean Clothing (17.) JanSport division of VF
Outdoor (18.) University Co-Operative Society (19.) Lakeshirts dba Blue
84 (20.) Nike by Branded Custom Sportswear (21.) Campus Drive (22.) New
Era Cap Co. (23.) Cutter & Buck (24.) New Agenda (25.) Wildcat Retro Brands
Trends
Willingness to Pay
US: Buying Green Trends
Buying Green Globally
Factors Considered in Purchasing
(Age)
Global: Factors Considered in
Purchasing
Factors Considered in Purchasing
(Gender)
Global: Item Features Impacting
Price Paid
Women College Sports Apparel
Global: Item Features Impacting
Price Paid
Nielsen- Willing to Pay for Companies Who Give Back
• A global online study of 28,000 consumers in
56 countries, conducted by Nielsen in 2011 to
determine the effectiveness of cause
marketing, found that as many as 46% of
global online consumers were willing to pay
more for goods and services from companies
that are giving back
Key Statistics – Buying Green (Globally)
•
Globally, all the listed green attributes matter more to women than to men: for
example, with 56% of female respondents considering the descriptor
“green/environmentally friendly” to be important, versus just 49% of males
•
With consumers becoming increasingly demanding with regard to the origin,
manufacturing methods and contents of the products they buy, product labels are
playing an ever more important role in buying decisions and are the subject of
ever more stringent regulations
•
There is nevertheless a strong association in consumers’ minds between “natural”
and “organic” products, with 46% of respondents defining natural as “also
organic”, and 61% of respondents defining “organic” as “natural”
•
Undoubtedly influenced by increasing reports about poor living and working
conditions in third world countries and a desire to offer a fair price to producers,
as many as 43% of respondents globally said they would pay more for “fair trade”
products
•
More than half (52%) of all respondents showed themselves to be willing to pay
more for products with a “natural” claim
•
Shares were slightly lower for the attributes “organic” (48%), “locally sourced”
(47%), “free range” (46%) and “fair trade” (43%)
Global: Factors Considered in Purchasing
“How Important are these factors when considering purchasing a product or service?
Source: Euromonitor International
Global: Item Features Impacting Price Paid
“I am willing to pay more for a product that is_?”
Source: Euromonitor International
US Buying Green Trends
•
US consumers did not display a significant interest in green and ethical shopping:
the descriptor “green/environmentally friendly” mattered to 41% of respondents,
which was similar to the levels seen in the European countries
•
The largest share of respondents (45%) deemed “supports local communities” to
be an important factor
•
Women showed themselves to be more concerned than men with all factors
except sustainability, where the level of interest was equal
•
There was a large gap between men and women when it came to the importance
attributed to “green/environmentally friendly”: 37% versus 44%, respectively
•
Unlike the situation in most other developed countries, concern for green/ethical
factors when shopping (with the exception of local community support) was
shown to decline with age
•
Notably, the percentage of those deeming “organic” product to be important fell
from 36% among 15-29 year-olds to just 22% within the 60+ group
US: Factors Considered in Purchasing (Age)
How important are the following factors to you when considering purchasing a product or service?” by age group
Source: Euromonitor International
US: Factors Considered in Purchasing (Gender)
“How important are the following factors to you when considering purchasing a product or service?” by gender
Source: Euromonitor International
Market Trend- Women’s College Sports Apparel
Women’s
Apparel Sales
see triple-digit
growth
• Second largest
apparel category,
right behind
Men’s/Unisex TShirts
• Retail sales exceed
$350 Million FY1213
89 Million
Females SelfIdentify as
College Sports
Fans- ESPN
Sports Poll
Availability of
better product
selection
Availability of
Niche Products
• Cowboy Boots
• Design & Fit
• Innovative &
Stylish apparel
• Only 84.3 million
women selfidentify as NFL
fans
Source:http://www.asicentral.com/html/protected/news/counselor/july10/pdfs/ApparelLicensing.pdf
Financials
Current Manufacturers
Detailed Production Shift
Existing + Shift
Production/Country
Shift Impacts on Total Apparel
Current Manufacturers
Factory
FAR EASTERN APPARAL (SUZHOU) LTD. CO
Country
CHINA
FUJIAN FUTIAN GARMENTS CO., LTD.
GUANGDONG ESQUEL TEXTILES COMPANY LTD
JIANGSU ASIAN SOURCING HEADWEAR MFG.CO.LTD
NINGBO EASTEX
NINGBO ISUN FASHION CO., LTD
NINGBO SHENZHOU KNITTING CO. LTD. -#6 GARMENT FACTORY
QINGDAO RUIHE KNITTING
TMI ZHONGSHAN CO LTD
YUANTIAN KNITTING GARMENTS CO., LTD
CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
CHINA
CCH TOP (VN) CO., LTD.
ESQUEL GARMENT MANUFACTURING (VIETNAM) CO., LTD
FAR EASTERN APPAREL (VIETNAM) LIMITED
GREEN VINA
HANSAE VIET NAM CO., LTD.
I.S VIETNAM CO., LTD
MAXPORT J.S.C
MOLAND CO., LTD
S.J VINA CORPORATION
UNIPAX CO., LTD
UNITED SWEETHEARTS GARMENT (VIETNAM) CO., LTD.
VIET TIEN GARMENT CORPORATION
VINH HUNG - JOINT VENTURE CO., LTD (TMI VIETNAM)
YUPOONG VIET NAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
VIETNAM
MAS ACTIVE (PVT) LTD - CONTOURLINE DIVISION
MAS ACTIVE (PVT.) LTD. - LINEA INTIMO
SRI LANKA
SRI LANKA
Total Workers Line Workers Production ($sales 000s)
1,510
1,149
29,273
710
5,621
884
410
519
2,862
320
681
761
14,278
1,920
5,276
4,525
2,177
9,897
262
523
1,698
235
1,754
1,331
2,768
1,877
2,133
36,376
1,616
2,318
3,934
54,588
600
5,326
799
324
359
2,825
223
619
692
12,916
1,836
4,600
2,832
999
9,450
218
425
1,615
211
1,658
866
2,518
1,826
1,912
30,966
1,436
1,481
2,917
46,799
13,764
108,970
17,137
7,948
10,061
55,484
6,204
13,202
14,753
276,797
37,222
102,282
87,723
42,204
191,866
5,079
10,139
32,918
4,556
34,004
25,803
53,661
36,388
41,351
705,196
31,328
44,937
76,266
1,058,259
Detailed Production Shift
Factory
Production Shift
Total Workers
FY14
FY15
CHINA
NINGBO EASTEX
324
NINGBO ISUN FASHION CO., LTD
359
NINGBO SHENZHOU KNITTING CO. LTD. -#6 GARMENT2,825
FACTORY
QINGDAO RUIHE KNITTING
223
TMI ZHONGSHAN CO LTD
619
YUANTIAN KNITTING GARMENTS CO., LTD
692
GUANGDONG ESQUEL TEXTILES COMPANY LTD
5,326
10,368
VIETNAM
Asia Garment Manufacturer Co. Ltd
1,149
Esquel Garment Manufacturing Co. Ltd.
600
ESQUEL GARMENT MANUFACTURING CO., LTD
799
2,548
SRI LANKA
Polytex Garment Ltd. - Jaela
Polytex Garment Ltd. - Kegalle
Polytex Garment Ltd. - Koggala
Polytex Garment Ltd. - Yakkala
2,825
223
5,326
8,374
1,149
600
799
2,548
1,149
600
799
2,548
22,275
11,632
15,490
324
359
324
359
2,825
223
3,731
6,281
6,960
54,766
4,323
619
692
2,663
2,663
6,637
12,916
12,000
13,415
51,626
51,626
683
MAURITIUS
Esquel Ltd. - Beau Bassin
Esquel Ltd. - Flacq
Esquel Ltd. - Grand Bois
Esquel Ltd. - Goodlands
Total
619
692
12,916
Production ($sales 000s)
1,311
12,916
250,393
Existing + Shift Production / Country
Factory
Production Shift
VIETNAM
Asia Garment Manufacturer Co. Ltd
Esquel Garment Manufacturing Co. Ltd.
ESQUEL GARMENT MANUFACTURING CO., LTD
CCH TOP (VN) CO., LTD.
FAR EASTERN APPAREL (VIETNAM) LIMITED
GREEN VINA
HANSAE VIET NAM CO., LTD.
I.S VIETNAM CO., LTD
MAXPORT J.S.C
MOLAND CO., LTD
S.J VINA CORPORATION
UNIPAX CO., LTD
UNITED SWEETHEARTS GARMENT (VIETNAM) CO., LTD.
VIET TIEN GARMENT CORPORATION
VINH HUNG - JOINT VENTURE CO., LTD (TMI VIETNAM)
YUPOONG VIET NAM
SRI LANKA
MAS ACTIVE (PVT) LTD - CONTOURLINE DIVISION
MAS ACTIVE (PVT.) LTD. - LINEA INTIMO
Polytex Garment Ltd. - Jaela
Polytex Garment Ltd. - Kegalle
Polytex Garment Ltd. - Koggala
Polytex Garment Ltd. - Yakkala
MAURITIUS
Esquel Ltd. - Beau Bassin
Esquel Ltd. - Flacq
Esquel Ltd. - Grand Bois
Esquel Ltd. - Goodlands
Total
Total Workers
FY14
FY15
Production ($sales 000s)
1,510
710
884
1,920
4,525
2,177
9,897
262
523
1,698
235
1,754
1,331
2,768
1,877
2,133
1,510
710
884
1,920
4,525
2,177
9,897
262
523
1,698
235
1,754
1,331
2,768
1,877
2,133
1,616
2,318
1,616
2,318
410
519
1,616
2,318
410
519
2,862
320
31,328.25
44,937.42
7,948.38
10,061.48
55,483.56
6,203.61
681
761
681
761
2,811
2,811
13,202.06
14,752.97
54,485.17
54,485.17
40,509
15,108
955,977
38,138
29,273.30
13,764
17,137
37,222
87,723
42,204
191,866
5,079
10,139
32,918
4,556
34,004
25,803
53,661
36,388
41,351
Shift Impacts on Total Apparel
FY13
Apparel sales
Revenues
Royalties
Growth
COGS
Cost reduction
Gross Profit
Margin
Selling Expenses
G&A
EBITDA
D&A
Interest (Income)
EBT
Income Tax
Net Income
6,820
173
3,749
3,071
44%
740
1,357
975
105
869
215
655
FY14E
7,434
187
9%
4,087
5
3,351
45%
806
1,479
1,066
115
951
235
716
FY15E
FY16E
Production shift
8,103
8,832
205
224
9%
9%
4,454
4,855
13
23
3,662
4,000
45%
45%
879
958
1,612
1,757
1,171
1,285
125
137
1,046
1,149
258
284
788
865
FY17E
9,627
244
9%
5,292
26
4,361
45%
1,044
1,915
1,402
149
1,253
309
943
FY18E
10,493
266
9%
5,768
29
4,754
45%
1,138
2,087
1,529
162
1,367
338
1,029